Benjamin James in the Times Brief – Tainted Presidents club donations do not have to be returned

Recent allegations about the now defunct Presidents Club charity dinner prompted Great Ormond Street Hospital in London to announce that it would return all donations from the event.

The allegations of sexual harassment at the Presidents Club event were extreme, but are there situations when it is appropriate for a charity to return a donation? The immediate answer for much of the public will be no; however, the decision for trustees is much more complicated.

If a request is made by a donor to return their donation, this should immediately put trustees on alert. This is a well-known form of money laundering and in returning the money trustees may actually be committing a criminal offence. To protect themselves, trustees must go through a number of steps, which may include reporting to the National Crime Agency. After making their report the trustees will then have to act in accordance with the instructions of the agency or rightly be prosecuted.

In other circumstances, trustees should only refuse or return a donation if the harm caused by accepting or keeping the donation outweighs the benefits that can be provided by keeping and using the money. Usually the harm will be reputational because of the source of the funds or the identity and reputation of the donor. That choice is often difficult and the trustees must reach a decision that is in the best interests of the charity.

A donation may be refused if the donor’s motives are to legitimise their own actions, for example an arms dealer donating to a human rights charity that campaigns against the dealer’s activities. Accepting a donation may undermine the charity’s campaigning by creating a link between the dealer and the charity. A similar situation occurs when a domestic abuse charity receives a donation from a convicted abuser.

Where the donation is linked to behaviour, as we saw with the Presidents Club, the decision to refuse or return a donation is much harder. In such a case the trustees have to weigh the behaviour of those involved in the incident against the effect on the charity.

Does the charity wish to be linked to a donation related to a particular incident? Does accepting the donation legitimise a person, group or behaviour and how will other donors react with potentially being linked to the same incident? Will returning the donation have a negative impact on the charity?

In the case of the Presidents Club scandal, a charity supporting animals, for example, may find it hard to justify the return of the donation, whereas one working with the victims of sexual harassment or violence would be perfectly justified in refusing or returning a donation. However, if returning the donation would undermine the finances of that charity, the trustees would not be acting in the charity’s best interests and may need to retain the donation, even if a donation to a similar charity with unaffected finances was returned.

Benjamin James is the head of charity law at the London law firm McCarthy Denning

This article was first published in The Times Brief, Febuary 2nd 2018 and can be found by clicking here